H2 2014 starts on strong note with continued improvement in credit performance of smaller businesses says WAIN Street Business Default Index

Business Default Index at lifetime low of 6.98%
Smallest businesses continue to show stand-out credit performance

WAIN Street reported Wednesday that the Business Default Index posted a 0.11% improvement in July to start the second half of the year at 6.98%—its best reading since index inception in December 2009.  The index is quoted as a seasonally adjusted, annualized default rate.  An increase in the index corresponds to deterioration in business credit quality.


Monthly Business Default Index levels.

The associated Diffusion Index which measures the degree to which the change in default rate is spread throughout businesses read 49.9 in July corresponding to nearly an equal number of businesses improving and deteriorating in their credit performance.  The sustained decline in default rates and stable diffusion values paint a positive picture of decrease in losses incurred by lenders.


Monthly change in Business Default Index (upper panel) and monthly Diffusion margin (lower panel).  The recent pattern of decrease (improvement) in default rate and stable diffusion values corresponds to decline in loss severity.

“Businesses have improved their credit performance to below Great Recession levels”, said Vidur Dhanda, Publisher, WAIN Street.  “And with the smallest of the small businesses – sole proprietorships and businesses with fewer than 20 employees – posting default rates markedly lower than the aggregate index, lenders now have an opportunity to grow their portfolios and fuel business activity.”

The complete August 2014 report with business size-based sub-indices and detailed industry sector and geography breakouts is available here.

The WAIN Street Business Default Index is computed monthly based on the credit performance of nearly 18 million US businesses that have been tracked by WAIN Street for over 12 months.  WAIN Street’s research publications help credit market participants better serve mid-market and small businesses.